Texas LLC Taxes

LLC Pass-Through Taxation

By default, LLCs don't pay taxes directly. Instead, the LLC members report the income (or losses) on their personal Form 1040 tax return. This is called pass-through taxation — tax responsibility "passes through" the LLC to its owners.

How Are LLCs Taxed in Texas?

By default, a Texas LLC is taxed by the IRS based on the number of members:

• An LLC with 1 owner (Single-Member LLC) is taxed like a Sole Proprietorship
• An LLC with 2+ owners (Multi-Member LLC) is taxed like a Partnership

These are the "default" statuses — automatically applied based on member count. You can also elect to have your LLC taxed as a Corporation (S-Corp or C-Corp) by filing extra paperwork with the IRS.

Single-Member LLC (default)

The IRS treats Single-Member LLCs as Disregarded Entities — the LLC doesn't file its own federal return. Instead, the owner reports LLC income on their personal Form 1040 (Schedule C if owned by an individual).

Multi-Member LLC (default)

Multi-Member LLCs file a Form 1065 Partnership Return and issue a Schedule K-1 to each member. Each member then reports their share of profits on their personal Form 1040.

Husband & Wife LLC

Electing Corporate Taxation

• S-Corporation: File Form 2553 with the IRS. Can reduce self-employment taxes once the LLC has consistent profits (generally $70,000+ net income per member). Speak with an accountant first.
• C-Corporation: File Form 8832 with the IRS. Uncommon for small LLCs. Primarily useful for large employers offering healthcare fringe benefits.

Texas State Income Tax

Good news — Texas does not have a state-level personal income tax. You do not need to file a state income tax return for your Texas LLC.

Texas has no state-level personal income tax or corporate income tax. However, Texas LLCs are subject to the Texas Franchise Tax if annual revenue exceeds the threshold.

Texas Special LLC Taxes

Texas Franchise Tax

Texas imposes a Franchise Tax on LLCs with annualized total revenue above $2.47 million (2024 threshold, adjusted annually for inflation).

• LLCs below the threshold: File a "No Tax Due" report — no tax owed, but filing is still required
• LLCs above the threshold: Pay the greater of (a) 0.375% of total revenue (for most LLCs) or (b) 0.75% rate on taxable margin. Retailers and wholesalers use a 0.375% rate.
• Public Information Report (PIR): All Texas LLCs must also file a PIR annually — free to file, due May 15

Both the Franchise Tax return and PIR are filed with the Texas Comptroller.

Local Income Tax

You and/or your LLC may also need to file and pay income taxes with your local municipality (city, county, etc.). Contact your local government or hire an accountant to confirm local requirements.

Texas Sales Tax

If your LLC sells taxable products (and sometimes services) in Texas, you may need to collect sales tax and register for a Seller's Permit (also called a resale license or sales tax permit).

Texas's state sales tax rate is 6.25%. Local rates (city, county, transit, special district) can add up to 2%, making the maximum combined rate 8.25%.

Register for Texas Seller's Permit →

Contact the Texas Comptroller of Public Accounts at 888-334-4112 with questions.

Texas LLC Payroll Taxes

If your Texas LLC has employees, you must handle payroll taxes, which include:

• Federal income tax withholding
• Texas state income tax withholding (Texas has no state income tax withholding)
• Social Security and Medicare taxes (FICA)
• Federal unemployment tax (FUTA)
• Texas state unemployment tax (SUTA)

Payroll calculations are complex — most LLC owners hire a payroll service or accountant.

Texas Tax Agency Contact

Texas LLC Taxes — FAQs